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The Biggest Risks Facing FireEye Inc.

FireEye's business is growing rapidly, but it faces several significant issues.

Cybercrime may be one of the single biggest threats facing businesses today. With criminals looking to exploit security vulnerabilities, companies' trade secrets and customer relationships might be only one major hacking scandal away from being lost forever.

For this reason, FireEye(NASDAQ:FEYE), with its next-generation security services, presents an interesting opportunity to investors. Demand for the company's services is growing quickly. Last year, its revenue rose more than 163%, and it expects revenue to grow more than 40% in 2015.

But it isn't without risks. Indeed, FireEye faces a number of them. Below are three of the biggest.

The model is still unprovenAs an upstart, speculative company with a unique set of offerings, the long-term acceptance of FireEye's products may be one of its largest risks.

FireEye offers its customers a next-generation suite of security services designed to detect and halt advanced threats. FireEye's platform uses a network of virtual machines to test potentially malicious software in real time, allowing it to discover issues ahead of the general security community. This stands in contrast to more traditional, legacy security providers that still rely on signature-based approaches to thwart attackers.

FireEye's platform has an advantage over its older competition, but its novel status makes it a difficult sell. Many of FireEye's customers are large corporations and government institutions with fixed IT security budgets -- FireEye has to directly sell customers on the nature and benefits of its products.

In a recent filing, FireEye admits that businesses are more comfortable with traditional security solutions, and that its next-generation platform is rarely accounted for in fixed annual budgets.

FireEye is seeing strong demand for its products, but the profitability isn't there, and management doesn't expect FireEye to be profitable anytime in the near future.

Its costs are surgingTo convince its customers to purchase its products, FireEye has had to invest in its business aggressively. For an upstart tech company, some costs can be written off -- large R&D budgets, for example -- but FireEye's single biggest expense last year was sales and marketing.

FireEye spent almost 100% of its revenue on sales and marketing last year -- more than $401 million -- and expects to spend about 71%-75% of its 2015 revenue on the same.

The company is heavily reliant on its direct sales force to juice demand for its products, as their novel nature requires direct contact to ensure demand. In time, as FireEye's products become more commonplace, its ability to more easily retain its customers may grow significantly, and such aggressive spending on sales and marketing may not be necessary. But unless (and until) that day comes, FireEye may find it difficult -- if not impossible -- to achieve profitability.

It's facing increasing competitionFireEye is also facing increasing competition from a host of competitors who are aggressively entering the space.

Competition is a risk for any company, but it's particularly notable for FireEye, given that its business remains highly speculative. If Palo Alto Networks, Trend Micro, or any of the larger security companies outmaneuver it, FireEye could have a difficult time succeeding.